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“How to position your product” is the biggest question.

“No matter how many times you explain, customer just doesn’t get it”

“We expect user to use our product in X way, but they use it in Y way”

We do ‘this’, but they think we do ‘that’ and starts comparing us with something ‘that’.

If this is your Kaifiyat (frustration), then you are not alone. Most of the startup entrepreneurs and marketers face this challenge every day.

“How to position your product” is the biggest question.

Shankar Maruwada, brand builder for Aadhar (UDAI project) and P&G products ran a very intensive round table discussion at TouchMagix office Pune. With Twelve entrepreneurs, primarily building global standard technology products to solve business and/or consumer problems echoing same problem – How to position my product without ambiguity.

Beginning of the session, Shankar made it clear that its not a “Gyaan” session, no checklist, best practices or a formula. There is no one pill to solve everybody’s problem. Infact, Shankar insisted, “You’ll walk away with more questions than any answers.”

Bob’s Story: Very first thing Shankar asked all the participants to write a brief story of our “Bob – The Customer”.

Imagine Bob is your most prominent customer. Bob has a problem, Bob uses your product, your product improves Bob’s life.

Rest of the day, Shankar used the “Story” as a base to have each participant pitch/sale their product to everybody in the room. As a participant pitches his/her product, rest of the group critiqued it as a customer. Since most entrepreneurs come from a background and/or experience where they could imagine a use of the pitched products, they were able to provide valuable inputs.

While one entrepreneur pitched his enterprise communication product, while someone else pitched their idea to implementation services business. Rest of the group found it difficult to understand “what exactly does it do”. Thats when Shankar helped with his expert probing questions to highlight the core problem these entrepreneurs are trying to solve. The group also helped highlight a critical situation where the product could make the most impact.

This exercise helped to understand “Although your product might be solving 10 problems or your may have 10 different features, it is important to understand which is THE MOST BURNING PAIN/PROBLEM your product help solve. Focus only and only on that. This helps creating a “Good positioning” in customer’s mind as he is looking for a solution for the same.

DSC_4659Curse of Knowledge

At this point, Shankar introduced a concept of “Curse of knowledge” which works in both ways. To prove a simple yet profound point, Shankar made us perform a group exercise. (I won’t reveal the details as it will spoil the fun and learning if you happen attend the session in future)

This exercise helped realize two things –

  1. What you think is easy for customers to understand, may not be that easy. So work hard at it.
  2. Once you “Know” something, it is difficult to Not know it. – Curse of knowledge.

Curse of knowledge may work in two ways. Based on what words you are saying in your pitch, your customer starts connecting dots in his own mind with his pre-knowledge and starts comparing your products against it. If your pitch helps tap into right knowledge, customer quickly gets the point. However, if your pitch distracts him on different line, then you face a challenge of not being able to convince him. Most importantly if your product is expecting to change his existing habits, then you face a real challenge as customer (in his mind) will always try to defend his own working habits and will be reluctant to accept/understand what your product does. Here Shankar gave an example of if someone try to change our deep rooted email behavior, will face a significant challenge unless you bring a real value proposition that customer cares about. Here one of the participants shared his experience of how people are looking at website updates as a “job to be done” whereas same users are perfectly comfortable in updating their status on social media.

“The hook” and “The Golden Circle”

At this point Shankar introduced the “Hook or Nail” concept by showing DropBox Product video. In this video, Lee Lefever has identified a common hook from day to day real life of need to organize things in one place. How this hook helps in relating to the need of organizing your digital assets in one place accessible anytime, anywhere. Followed by this Siman Senek’s Golden Circle emphasising on importance of “WHY” and how order of WHY-HOW-WHAT of could change the way people perceive you. The key message here was that “People dont buy what you do, people buy why you do it” and how this is at core of Apple’s success. Shankar also showed another video where complex concept of differential gear was explained with simple analogy of pared bike riders.

Now was a time for us to re-write our Bob’s story by identifying “Hook” and techno-jargon less clear messaging. A few more pitches/product-videos were reviewed and critiqued. This time, Shankar steered the discussion to gain more clarity by drawing mind map of every pitch. With his expertise in digging deep into core emotions, he helped participants to identify keywords that could help them refine their pitch to drive clarity. In this exercise, you want to identify all objectives, emotions, and needs related to your product. Now, arrange them in their priority, connect them with relevance, and eliminate those that add no value or create confusion. Here, asking “Why” is an important aspect of finding the truth and getting clarity. To supplement his point, Shankar shared couple of stories from his efforts while establishing Aadhar brand. How interactions with rural population simplified Aadhar’s positioning (“Pehechaan hi Jindagi ka Aadhar hai”) and help achieve massive adoption.

Framework to think: In the last spell, Shankar summed it all in a simple framework. Every concept has three parts.

Mindset (Belief) – A mindset or accepted/known beliefs of your customer

Benefit – The solution or value your product creates

Support – Social proof or reason to believe

Example: Afraid of wearing a black suit (Mindset) in a party as dandruff could expose you? Worry not, use our solution to get rid of (real benefit) stubborn dandruff and be confident (emotional benefit). Endorsed by these celebrities (Social proof), our dandruff solution builds the confidence to make you hero.

In five hours of intense group discussion, all of us had good understanding of what might be going wrong. Everyone has different product, different customer mindset, different challenges and different situations; but each one will be searching for one “Hook” around which a pitch can be built.

Product positioning starts in Customer’s mind. You need to find a hook where you could position the product with utmost clarity. Next time you struggle with “How come they don’t get it”, ask yourself – Did I find the right hook or have I tapped into wrong zone of knowledge?

 

Useful videos:

Guest post by Abhijit Mhetre founder at Canvazify – visual platform that helps entrepreneurs and design thinkers drive innovation through collaborative ideation. Abhijit is passionate about collaborative innovation and loves everything about running a startup.  

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From India… and going global

Over the last two decades, India has created a number of world leading companies of global scale. Many first scaled in India before taking the first international flight and now many of them are focussing on global markets right from the start – Day One Global.

“Gravity” defying Prime Focus is now Hollywood’s VFX powerhouse and a world leader in the media and entertainment industry. Gurgaon based Zomato is now present in over 22 countries with million plus restaurants in their kitty. Google Capital funded Freshdesk has customers in 145 countries with over 50,000 customers and is closing the gap with its larger peers like Zendesk and Salesforce (Desk.com), InMobi is the world’s largest independent mobile ad network serving its clients across over 200 countries. Starting from its Indian base in 2001, VFS Global ( part of Kuoni Group), the industry pioneer and world’s leading visa services provider, works for 45 governments, operates over 1700 application centres in 121 countries and holds an estimated 50% market share of the global outsourced applications market.

All the above companies are considered pioneers in their market segments globally and are either already the world leaders or are challenging them. Over the next couple of decades hundreds more world leaders are likely to emerge from India.

India Emerging 20 – A Turbocharger for companies looking at global scale

India Emerging 20 aims to discover the 20 most promising global Indian companies and provide them the visibility and that platform to make a mark in the global arena.

This unique programme is led by London & Partners, the Mayor of London’s inward investment company which has a proven track record working with over 2000 international businesses. The inaugural edition of this programme is supported by British Airways, BDO, Newland Chase and UK Trade and Investment.

Program Qualifiers

  • Companies registered in India OR companies registered outside of India having a majority Indian management.
  • Companies should have worked with global clients, and/ or products suited for global markets. Having an international presence isn’t necessary.
  • Established after year 2000 and should have global ambitions.

Selection process and Benefits

The selection process spanning over a period of 20 weeks would assess companies on the basis of three broad parameters- Global Scalability, Innovation+Differentiation and Performance. Companies need to nominate themselves in the programme using the nomination form (link). Valuenotes, the knowledge partner will be using their 3 stage rigorous assessment framework and a robust rating model to ensure a high quality selection of top 50 companies. Once the top 50 companies are selected, each of them will need to submit a brief presentation to a jury panel who would then come out with the final list of 20 companies. The Jury round would be held in Mumbai ( Dec 14th 2015), Bangalore ( Dec 16th)and Delhi ( Dec 18th)

The selected 20 companies will be felicitated and awarded in London besides helping them gain international recognition – critical to global expansion. The awards programme will also offer opportunities to network with investors, business heads, thought leaders and mentors of global repute. Courtesy British Airways, all 20 companies would be flown down to London in World Traveller Plus – Premium Economy Cabin to participate in this special award ceremony in February 2016.

Nomination process has already started and the last day to send your nomination is 20th Nov 2015. For more details visit www.indiaemerging20.com

Guest Post by Gautam Sehgal, London Partners

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Indian Regulators: Let start-up founders and investors worry about Silicon Valley; you try and deliver Delaware. Please.

Indian regulators have, in recent times, been talking a lot about creating a conducive environment for businesses, specifically startups, given the recent exodus of some renowned startups to foreign shores to take advantage of friendlier business policies and regulations.

In order to create a thriving ecosystem, they are taking inspiration from places like Silicon Valley, considered globally to be the Mecca of technology entrepreneurship. I am often asked by budding Indian entrepreneurs and even the successful ones –will Indian regulators be able to give the Indian startups an ecosystem similar to what Silicon Valley has provided?

My answer to this oft-asked question is – Why just look at Silicon Valley when there’s so much more that the Delaware framework can teach us? And trust me, they often get confused.

It is Delaware where most businesses are registered in the US and not Silicon Valley. Reason: the flexible governance framework that allows for ease of doing business, which is all the more crucial for startups.

The first and foremost reason behind this is that the Delaware General Corporation Law, by design, is a simple yet dynamic one. Although it was written in the last decade of the 19th century, it has been constantly fine-tuned since then to suit the ever-changing business environment. Moreover, it has managed to strike the perfect balance by treating both, regulators and business entities at par, with no bias towards either, which is rare to see in other countries. Even the statute permits companies and their shareholders to work with maximum flexibility to ensure they work smoothly.

Then there’s the Delaware legislature that not only gives high priority to corporation law but also has a good expertise over these matters. The state legislature also has an understanding with the bar and it is clear that when proposing corporate legislation, the bar will deal candidly on any matter that involves Corporation Law.

Lawyers too, swear by their courts. The Court of Chancery has developed an exemplary expertise over matters related to Corporation Law. Not only do you see some of the best lawyers practicing in Delaware, you will be pleasantly surprised to see how familiar the judges are with complex business transactions and the kind of insights they have about the inner workings of corporations. Since the court has already dealt with cases that cover almost all aspects of businesses, it more or less has answers to most questions that haunt businesses. This offers them a greater sense of security.

Another feather in the cap is the ultra-modern, user-friendly and absolutely pro-business Delaware Secretary of State Office, which facilitates businesses in the true sense rather than following a bureaucratic approach.

It is difficult to find any other ecosystem that has so much to offer to startups or even half of what Delaware offers. The kind of philosophy, processes and above all, mindset to run businesses there is enviable for even Silicon Valley. If a similar framework can be replicated in India, there will be no looking back for the dreamers in India who are trying to take baby steps in the world of business.

What are your thoughts?

Guest Post contributed by Ravi Kiran.

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When we learned to crack US sales from India

October 24, 2015. A Saturday after Dussehra, and 59th roundtable of awesomeness in lively office of Zapty.

Not only Sanjay (founder of Zapty) was great, offices of Zapty welcomed us with a lot of natural light. Then, introductions happened and people started to get comfortable around each other.

It was Samir, founder of Shop Socially, who flew from Pune a day before, was going to share the things that worked (and didn’t work) for him at ShopSocially when they built a team to sell to US companies from India.

PS: He also has sales people in US, but we will get into that as well.

We were scheduled to start at 11:00 AM, but kinda waited till 11:15 to start. I call this Bangalore Standard Time (not really late, but a little late)

Then I clarified certain things about Round Table and set the context to make sure everyone understands it’s more like a discussion than a lecture session. Also, it was clarified that its a safe place to share and nothing that is sensitive will leave the walls of that room. That made everyone attending it comfortable and also people were ready with their discussion hats on.

Then Samir shared some great processes which he has developed over 20+ years of experience.

Ohh man, if I could only describe it in words, you should have been there to feel the transparency we saw in an Entrepreneur. The goal of each function inside organization was clear, more like crystal clear. Tons and tons of questions were asked and we all shared some great insights.

Well, here is my attempt to put some of the learnings we had in words:

    • Marketing is Lead Generation: From beginning, Samir made it clear. In his business, marketing is Lead Gen. Branding is a byproduct of marketing, but marketing is for one thing and one thing only, Lead Generation. So, all efforts are measured on this parameter.
    • A simple Motto – Get conversations going: Samir pointed this out multiple times during discussion, getting conversation going is the single most important step in a sales cycle. Do whatever it takes to get conversation going, if your prospective customer is not responding to product/service/problem A, show them B, then C. Do anything to get conversation going.
    • 5 min callback to warm leads: So, this is a 2 part lesson. Number one “define” as clearly as you can, what is a “warm” lead. And then making sure 5 minute callback to warm lead. Now, both of these tasks are important, and success of your “sales” department depends on this. You can define “warm” leads too loosely and your sales team would end up wasting a lot of their time. Or you could end up defining your “warm” lead to tightly, and end up leaving a lot of money on the table. So, constant feedback is super necessary and should be part of the process.
    • For a product, IT HAS TO LOOK STUNNING..PERIOD: I don’t think this needs any explanation, but when he said this, he was really clear on one thing. No compromise on this, its HAS to look stunning.
    • Where to start? Email List: We spent quite some time on how to do this in a scalable way and what are great do’s and don’t around it.  
    • Quora and LinkedIn Pulse are great places to start for B2B sales. If you can get one of your articles on LinkedIn Pulse, that can do some wonders in early stages.
    • For inside sales – warm leads only: Samir was very clear on another thing, how anyone in the team spends their time. And inside sales team should be spending their time on “warm” leads only.
    • Text only emails are best: You can surely try more formats, but whole group agreed on this, as pretty much everyone had experience with sending a lot of emails.
    • For calling, make a script: If you get a chance to get on a call with customer, don’t go without a script. It’s like going to war without a plan..don’t do it. Make a script and rehearse it.
    • Optimize lower end of funnel first: Samir made this super clear that it’s super expensive to lose sales at lower end of the funnel, so if you are optimizing start from bottom of the funnel.
    • Case studies, no…Stunning Case Studies, YES: We according to Samir, anything that you put in front of potential customer (PPT’s, Case studies etc.) has to look great, nothing less than “stunning”.
    • Retargeting – FOR EVERYONE: It doesn’t matter what kind of product you are selling, retargeting ads are for everyone..
    • Video testimonials: If you can get video testimonials, they are the best. You can even put them on landing pages..they are expensive, but might be worth it

Tools / Service companies that we discussed:

  • BuiltWith
  • Datanyze
  • DataCall (a company in Bangalore)
  • Benchmark
  • Yesware
  • Pipedrive
  • Localphone
  • Ringo
  • Express Writers – Bangalore
  • Discover.org
  • AgileCRM

Now, it’s quite possible that you want to know more about the process we learned in the RT, but may be that’s the reason you should attend next Round Table in your city..

PS: Here is another post about Samir’s round table in Pune..

Guest Post Contributed by Natwar, Around.Io

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With 16000+ installations in more than 10 states, in just 3 years. KisanRaja is growing big!

Perseverance or persistence are the 2 most important characteristics for an entrepreneur, says Vijay Bhaskar Reddy Dinnepu, the Chairman and CEO of KisanRaja. In an exclusive interview with Ashutosh Ranjan and Ragavendra Prasath of iSPIRT, Vijay shares how he came out of the monthly salary mania and started working to solve the problem of farmers. Here is the edited excerpts from the interview.

Our first question to you is, how did you come out of the monthly salary mania?

  • Starting Vinfinet Technologies (KisanRaja) was not a sudden decision. In fact, I was doing research for quite some years during my weekends and evenings after work hours on how do we solve the problem of farmers. Before starting KisanRaja, I took an excel and jotted down how much will be my family expense with out my salary for the next 2 or 3 years. How to manage it. I wanted to keep my expenses very minimal.

How many iterations and months have gone into developing KisanRaja?

  • It took 8 iterations to reach our current version of KisanRaja which is very compact. The very first prototype was 8 Kg. We used 2 wheeler battery to power it. Many months have gone into each iteration. One iteration took 2 months and some others took more time.

You get lot of ideas when you start developing products? How did you prioritize Must have and Good to have features in KisanRaja.

  • We use the term Co-Creation. We collaborate, ideate, explore and experiment with farmers who are our customers. We understand what is actually required to them. We note down the conversations with them and work based on those inputs. We learnt that our first version had too many features which are actually not required by the farmers and as I mentioned it was 8 Kg. Even in our IVR to assist farmers, we use local slang. For example, slang used by people who speak Tamil in Chennai is not the same as people speak in Madurai. So took a blend of slang using it in our IVR.

Currently, the world is moving towards smart phones mania. We are a GSM based controller. Do you have any plans to upgrade to App based monitoring?

  • We have an Android App. Farmers can control the motor from their smart phone. So far 100 downloads done. We are working on the UI part to provide better experience.

How currently, how big is your team? (employees)

  • Currently, we are 20 member organization.

Are you a still a bootstrapped or funded startup?

  • We are looking for funding. So far, we have taken bank loans and support from family members. We want to expand in other regions in India. Currently, we have 16000+ installations in more than 10 states through our dealer network.

Any other new products that we expect from Vinfinet Technologies?

  • KisanRaja is our current focus. We are working on similar products lines with some enhanced features.
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Early Stage Start-up? Your Chance to Get Market-Ready and Mentored by the Best Brains in the Business!

Celebrating AnthahPrerana – the deep driving desire and self-motivation of an entrepreneur.

You are what your deep, driving desire is
As your desire is, so is your will
As your will is, so is your deed
As your deed is, so is your destiny

BrihadAranyaka Upanishad (4, 4.5)

AnthahPrerana is a TiE Bangalore initiative that recognises entrepreneurs for their articulation and the path to realising their vision and innovation. It is NOT a business plan competition though the business viability and feasibility will be a factor in this recognition. It is a competition that will acknowledge, and reward, the future potential of the entrepreneur. Think of it as an idea booster. We pick the best unfunded start-ups in commercial and social sectors, mentor them and get them market ready for exponential growth.

Banner SocialWe are partnering with Amazon, Let’s Venture HeadStart and NSRCEL, IIM-Bangalore to deliver personalized help to our winners!  We are assembling another high-powered jury comprising of acclaimed IIM-Bangalore faculty, successful serial entrepreneurs, investors and senior corporate execs at TiE Bangalore to select and mentor a new batch of start-ups.

Selection Criteria:

  • 0-3 years old companies
  • No angel or VC funding
  • Financially viable, for-profit ideas

What Do We Offer?

  • Showcase your idea to investors and start-up gurus on the Awards night
  • Get highlighted on the extensive angel investor platform of our partner Let’s Venture
  • 2-day Bootcamp with renowned mentors at our partner NSRCEL       IIM, Bangalore’s campus
  • Automatic entry into our 90-day TiE-EAP programme with the best mentors in town (Hall of fame: RedBus, Just Eat were mentored at TiE Bangalore)
  • $1000 worth of Amazon Web Services credits
  • Continued hand holding and support from TiE Bangalore network of mentors and charter members.

Key Dates:

  • November 5th, 2015: Deadline for applications (Apply now!)
  • December 1st – 5th, 2015: Top 30 Applicants present to the Jury
  • December 15th, 2015: Awards Night
  • January 2nd week, 2016: 2-day bootcamp at IIM-Bangalore
  • February – April 2016: TiE-Turbo mentorship program

Some of the past winners who have gone on to do well are: Channelyst, HeadOut, Something’s Cooking, Kamal Kisan, Discover Dollar, PParke

For more information, visit: www.anthahprerana.org

Guest Post by Kunal Kashyap, TiE Bangalore

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SaaSx Chennai Express – Board this Train Now!

I am Amit – running a SaaS venture Interview Mocha, a pre-employment skill testing company. In this blog I am sharing my learning from SaaSx and how it helped me achieve product-market fit and grow my company fast.


As they say, “a startup’s life is a roller coaster with ups and downs”, this ride has not been easy for me either. Just to talk in numbers, in the first 1.5 yrs of our existence, we were able to add only 22 customers and that too mostly from Pune, our home-ground. While in last 6 months, we have been able to add over 100 customers from 11 different countries. Needless to say – SaaSx has played a major role in helping us achieve this. Hence, I would like to share my journey and learnings from SaaSx with the larger community of SaaS people out there.

My SaaSx journey started when Prasanna advised me to visit SaaSx-1 in Chennai and Avinash was kind enough to allow me immediately. I had one more reason to visit Chennai – to meet Krish (my mentor).  I am happy to thank SaaSx, Prasanna Microsoft, Suresh  Kissflow, Krish ChargeBee and Girish Freshdesk who are constantly acting as a source of knowledge and guidance for me.

Interestingly, I found something common about all of them and you know what that something is…They are all from “SaaSx” and they are all from “Chennai” .

So now I can say that “SaaSx Chennai Express” is changing my (Interview Mocha) life completely and moreover this Chennai Express journey is a lot safer than Shahrukh Khan’s Chennai Express as there is no Tanghaballi (villain) here, only heroes :-)  and you still get your sweetheart Meenamma (Success).

Krish has helped us grow our daily leads from 2 to 10 leads a day. Suresh helped me multiply this number by his personal mentorship and playbook on Nuts and Bolts of Marketing & selling SaaS products to US customers from India for First Timers. Girish’s Talks always makes me think – how this poster boy of Indian SaaS knows all my key problems and their solutions. He narrates everything as if he is my personal mentor helping me sharpen my SaaS business skills.

So, here are the key takeaways, learning and some food for thought from my interactions with these SAAS champs:

1. Focus, Focus and Focus.

Focus on customer pain (mother-problem(s) you are solving that customers care about). Focus all your efforts to solve these problems the best way possible.

2. Your Product has to be Superb.

Customer success, Word of mouth and “Mouth of word” are the key for SaaS products and which is not possible without a superb product. Product is the core – keep it in mind.

3. Product Market Fit.

Your product needs to achieve a product market fit for adding customers quickly and scaling further. This is the first good thing that can happen to your start-up. Product/Market Fit is the degree to which a product satisfies a strong market demand. It has been identified as a first step to building a successful venture in which the company meets early adopters, gather feedback and gauges interest.

4. Cold Calling 2.0 doesn’t work.

Cold calling 2.0 won’t suit your economies for B2B companies with less than $ 2,000 annual revenue per customer. Though cold calling 2.0 is a great predictable way for pipeline generation, however it is not suitable to scale when you are charging very less annually.

5. Do not rely only on Email and Chat Support for closures.

Talk to signups/prospects over phone. We are 100% inbound till a person signs up. Talking to users helped us increase engagement with prospects and in turn more closures. Also, you get the insights that your sales team needs to understand.

6. Founders – Change the work timings if you are targeting US.

Analytics do help you understand customers but nothing better than talking to customer themselves. Quicker responses means more business.

7. SEO and Content Marketing are compulsory.

Content is King  & SEO is the way.  One or other traction methods may work, you can refer the list of all traction methods – google “Bullseye framework traction trumps everything”.

8. SaaS is Software as a Service.

Focus highly on support activities and customer success. Get immediate reply policy as a part of company’s DNA. Remember “Fast is Success”.

9. Understand behavior of SOHO, VSB and SMB for sure.

Each customer segment has its typicality and common needs. Understand their pain points, where they hang out over internet, how they buy, what makes them happy. Targeting big deals from enterprises in initial days may not happen. One funny thing, we have a few fortune 500 companies as our customers paying us $49 p.m. these are SaaS enterprises (business units) and not classic enterprises.

10. A/B testing is the way for SaaS companies.

What works and what works better – don’t assume much. Try A/B every now and then.

11. Tools help.

Start exploiting Mixpanel, Intercom, Moz etc.  being a SaaS player, trust and adopt SaaS.  These tools are helping us a lot in reaching, understanding and communicating with customers.

I consider the above points as extremely important for any SaaS business. I strongly recommend becoming a part of SaaSx community, if you are a SaaS startup in India. Chennai Express passengers/ drivers (Prasanna, Krish, Suresh, Girish, Avlesh, Paras, Avinash and many more) are easy to strike a conversation with, ask any question and receive immediate valuable responses.

Recently, I attended SaaSx-2 and acquired a new set of learnings. But I’ll wait to write on those learnings till I execute them successfully. And yes, looking forward to add 500 more customers before I board SaaSx-3 :-)

Thanks SaaSx Chennai Express. Wishing All the Best to all Indian SaaS Start-ups!

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Product Leaders Forum – Anchoring India to Drive Product Leadership Revolution

We are very excited to share that the city of Pearls – Hyderabad will be embarking its journey towards Product Leadership for the first time ever, at a one of a kind Conference – Product Leaders Forum (PLF) on Oct 30th   2015. PLF – a not for profit initiative has partnered with NASCCOM, PMI, HYSEA, ISB and TIE to organize a one day Conference that cultivates and enriches product mindset and transforms India into a hub of Global Product Leaders.

For details and registration – Please visit http://productleadersforum.org/plf2015hyderabad/

PLF is a volunteer driven initiative by the alumni of the Institute of Product Leadership (IPL). This one day Conference is arriving at Hyderabad on the 30th of Oct, 2015 and promises all product enthusiasts and practitioners, a power packed day to indulge in candid conversations with the CXOs, Executives and Visionaries from various realms of industries. The space of Product Leadership has been traditionally perceived as a forbidden kingdom into which entry is available only for a chosen few who hold specific job titles or for the “Product” companies alone. PLF has cleared these ambiguities and shattered the stereotypes associated with certain roles/titles at its incredibly successful past events @ Bengaluru and Pune that hosted 700+ delegates. Whether a product company or a service industry, an MNC or a startup, an Individual contributor or a People Manager, the rapid transformation in the Indian technology space, is touching everyone and is generating needs to Innovate. Service companies are expanding into platforms and products for newer revenue streams, start-ups have a mission to get bigger and the MNC R&D centers known for engineering excellence now aim to transform into think tanks and global business centers.

PLF-Hyd-iSpiritTo meet the needs of all the ambitious souls at Hyderabad searching for avenues to transform themselves and their organizations into ecosystems to thrive product leadership, PLF has designed this Conference with engaging panel discussions, interactive workshops and a platform to network with like-minded practitioners. Ranging from Product marketing to Data Analytics, The Future of Global services industry to Understanding Prod. Mgmt across industries, Intrapreneurship to Managing Politics at Workplace; all the topics are crafted carefully to engage delegates from diverse fields and roles. Be it Architecture, Project Management, Quality Assurance, Development, everyone has a platter to feel rejoiced and rejuvenated at the Conference.

Businesses are realizing that the time has arrived for their delivery centers to move up the value chain; there is a huge demand to create and nurture product leadership mindset as well as skillset among employees. PLF provides an opportunity to listen to the stories of how firms in India achieved it at the Conference key note that hosts a CEO panel discussion. PLF is bringing together leaders and visionaries from organizations like eBay, ADP, SAP, Infosys, Intuit, Broadridge, CA to name a few and hosting a platform for its delegates to get a head start into product leadership.

Again, we are very excited to share that the city of Pearls – Hyderabad will be embarking its journey towards Product Leadership for the first time ever, at a one of a kind Conference – Product Leaders Forum (PLF) on Oct 30th   2015. PLF – a not for profit initiative has partnered with NASCCOM, PMI, HYSEA, ISB and TIE to organize a one day Conference that cultivates and enriches product mindset and transforms India into a hub of Global Product Leaders.

For details and registration – Please visit http://productleadersforum.org/plf2015hyderabad/

Guest Post by Samatha Rani, PLF Volunteer & Product Owner at ADP Pvt Ltd

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A Recipe for Selling a Product Globally from India

iSPIRT regularly organises Playbook roundtables to help startups succeed by learning from successful entrepreneurs. One of such roundtable was conducted at GS Lab in Pune on 10th Oct 2015.

This PlaybookRT was focused on Product startups (B2B) who are keen to sell to the global market. The PlaybookRT was facilitated by Samir Palnitkar, President of ShopSocially.com. Samir hosted a highly interactive Playbook Roundtable for Product Startups and shared his journey of building ShopSocially globally.

Being a serial entrepreneur with over 20 years of industry experience, Samir’s passion is startups and new ideas. He is a founder of four successful startups which include I2P acquired by Lattice), Obongo (acquired by America Online), Ingot Systems (acquired by Synopsys) and AirTight Networks (category leader in secure, cloud WiFi). He is also an active early stage investor and advisor. His expertise includes social media, strategy, productization/execution, and business process setup.

Samir has authored two highly acclaimed books and he also holds 5 US patents.

In this highly intensive session, attended by over 12 Pune-based startups, Samir shared his insights on the strategies, techniques, team and the infrastructure required to sell a product effectively from India.

I was one of the attendees who were immensely benefited from this workshop. Here is a brief summary of the topics that we discussed.

Most of the early stage startups face following challenges:

  • How do we find customers?
  • How do we reach them?
  • Should I build a team abroad?
  • How much money do I need to a sales team abroad?

Samir not only shared how he solved this challenges but he also provided some actionable steps that can help to build a sustainable sales process.

Sales Process

Most organisations look at marketing and sales as two different departments, and most often there is little or no communication between these two. Samir strongly suggested to integrate these functions closely with each other for optimum results.

Since startups have tight budget, they tend to rely more on inbound marketing to generate the leads. Samir suggested to have a right mix of inbound & outbound marketing.

This is how it works at ShopSocially – Marketing team generates the leads through various channels, these leads and then filtered and after qualification, passed on the experienced Sales Executives who conduct a demo and close the deal. Finally, Customer Success team nurtures the clients and ensures minimum churn. Sales-Process

List Building

Samir shared some innovative ways to build the list of potential prospects. First step of building a list is to create buyer personas. We must know who is our target customer, which industry he belongs to?, what’s his title?, what’s his geographical location? how much is the revenue?, etc.

Once we identify the attributes of our potential customer, we can start hunting for the contacts. Sites like BuiltWith, Hoovers and Data.com can help you find the right fit based on the criteria you mention. Even if you get the website of the company, you can find out the contact details of your potential prospect. If you are short on time, you can outsource this activity and get someone to do it for you.

Key here is to find ways to consistently build the list and nurture it.   

Email Marketing Flow

Now, once we have our list in place, we need to contact them. It may sound like an easy thing to do but most companies get it wrong and end up spamming the email list.

Here are some of the tips –

  • Use text instead of large images in the email as most email clients block images.
  • Keep it short and to the point. Best to have maximum of 5 sentences.
  • Use only one link
  • Message should appear as a personal note rather than a marketing text
  • Send the email from an individual account instead of a generic email ID.

There are few bulk email software’s that can help you send automated emails at a predefined internal. For example, you can send 2nd mail automatically after 15 days and so on. With these tools, you can create an automated email marketing flow and send emails based on user behaviour.

Cold Calling Flow

So we have built the list and sent the emails. Now what? Should we start calling all of them now? Definitely not!

Cold calling random contacts does not help anymore. Once we send the first mail, we need to monitor the email opens, clicks and most importantly replies. If any of this action occurs, sales team should immediately call the contact.

This way the response rate will be much higher as client will be aware of the product and its offering.

Important things to keep in mind while making calls:

  • Create a short and precise calling script
  • Practice the script multiple times by doing mock calls
  • Track the response in a good CRM software

Setup A Meeting

Samir advised not to try selling your product during the first call itself. During this call, we should qualify the lead and setup a meeting to showcase the product. Depending on the product, it could be an online demo or an in-person meeting. This will be handled by a more experienced executive as discussed above.

Simplest way to setup a meeting is to use Google Calendar. You can quickly get the lead to accept the meeting after that call. Details of the meeting can be updated later.

Follow up & Closer

Once the meeting is over or demo is done, next step is to follow up. Based on the feedback you get from the meeting, you can setup a predefined follow up schedule.

Follow ups should be polite, non-intrusive and should not be spammy. You can share marketing collaterals like case studies, testimonials or webinar recording to make the decision making process simple.

Samir advised to create high quality marketing collaterals that have visual representation of your product. Once the prospect is in final stage of the funnel, you should aim for 10 to 30% closer rate. Focus should be on improving this close ratio.

Building A Right Team

To execute your plans, you need a good team. Based on the number of leads you can generate every month, reverse calculation can be done to estimate the number of resources you will need.

Samir suggested to use Linkedin and Employee Referrals to hire new employees. He strongly suggested to have mock sales calls with the candidate, no matter how experienced he is.

Its also important to design a good incentive plan to keep the sales executives motivated. Salary structure should have a fixed component and a variable commissioned component.

Tools & Infrastructure

In order to run the entire sales process smoothly, we must invest in a good infrastructure. Based on his years of experience, Samir recommended following tools:

  • Novanet for VOIP calling
  • Grandstream GXP-1400 – 2 line IP phones
  • Vonia headsets
  • Separate 2 Mbps Leased line for voice (for about 18 reps)
  • Separate Broadband Internet of 50 Mbps speed for data
  • Microtik Router to do traffic routing
  • Pardot software for email marketing
  • Suger CRM for lead tracking
  • ClearSlide for sharing presentations online

It was indeed a great learning experience for all the entrepreneurs who attended this PlaybookRT.

Guest Post by Harshal Katre founder at ProfitBooks – cloud accounting app designed for non-accountants. He loves everything about running a startup and often writes about it on the ProfitBooks blog.  

 

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SaaS is the new black – and it has found a place in Chennai

At SaaSx 2015, Girish Mathrubhootham, CEO of cloud-based customer support software Freshdesk and popularly known as the Rajnikanth (think an acting, singing James Bond) of India’s Software as a Service (SaaS) scene, did the unthinkable. He revealed the entire spreadsheet of internal data-based metrics that he presented to his investors in 2011. All the media people were asked to put away their weapons and, at first, I was a little disappointed that I wouldn’t be able to share any of those numbers. Soon, however, I realized that they weren’t even important.

After Girish’s investors took a look at his numbers – and, honestly, at the time, they were not all that impressive – they decided to email his clients with a feedback survey. The response was overwhelmingly positive, with 96 percent of Freshdesk’s customers expressing approval of the product. “We didn’t even expect that,” explains Girish. “The only other feedback we got was customers expressing their desire to see us expand our product into different areas.”

The fact that customers wanted to see Freshdesk expand was important for both the company and its investors. As its progress revealed, the most dynamic feature of a SaaS product is its ability to acquire and reacquire the same customers by offering insightful new features. And, while the transient nature of software products means that differentiation can be difficult to maintain, Girish went on to explain that capturing the market was all about moving in at the right time. “Of course, best practices are easily copied and hard to retain – that’s why I’m only revealing our numbers from 2011-2012,” he joked.

SaaSx 2015, held in Chennai, Tamil Nadu, the self-proclaimed SaaS capital of India, was full of similar insights. People visited from all over the country, the furthest having traveled over 800 miles from Ahmedabad. Those in India’s startup capital, Bangalore – this includes yours truly – traveled over 6 hours and 300 miles on a bus through the winding Western Ghats to reach its neighboring state of Tamil Nadu. Despite an early start, energy was high on the road to the conference – the 34 entrepreneurs on the Microsoft Ventures-organized bus managed to conduct an ice-breaking session without falling over during the turbulent bus ride.

“My biggest virtue as an entrepreneur was patience. And, my biggest mistake… it was probably patience,” quipped one young CEO.

Read more about the SaaS Leap of Faith, SaaS circles are all about community, a blog post contributed by Meghna Rao from TechInAsia

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Funding Game – The rules and the hacks via @skirani & @BKartRed

The weather in Chennai was finally getting kinder & more pleasant in tune with the time of the year, much like the funding climate which has been less testing on the entrepreneur in general. Depending on whether you ask a consumer product entrepreneur or a B2B SaaS product entrepreneur, the level of optimism could vary, but it’s optimism all around.

As a pre-event runup to SaaSx2, we met at Freshdesk’s office in Chennai, for the Roundtable on “What it takes to fund a SaaS company?”.

Shekhar Kirani from Accel and Karthik Reddy from Blume, joined by Girish Mathrubootham from Freshdesk, anchored the conversations.

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Shekhar and Karthik started the round table, with some pretty interesting nuances about what numbers ought to add up, for their investment to make the returns they promised to their limited partners. The conversation touched upon what it takes to get funded at the early stages (upto Series A) and what it takes to be on that path, beyond Series A. Girish chipped in with personal examples of how Freshdesk got funded and his first-hand insight into looking at early stage startups that get funded (or not)!

Here are some bite-sized insights from the conversation that lasted for 3 hours:

On the options for the entrepreneur

  1. Indian B2B entrepreneurs have bootstrapped their startups remarkably well that it’s not an exception. If you are a B2B entrepreneur bootstrap or do more with less. Wait for the right strategic opportunity to scale. With numbers backing you up, raise for growth.

2015-10-07 11.12.22On what drives investors’ decisions

  1. Don’t get discouraged with ‘No’ from a partner of a VC firm. They have their biases and baggages. It’s the partner who has a view and not the firm. Find your champion.
  2. Most investors don’t like it if the outcome has a cap to it — there’s a maximum that you can do in the market and that sets a pretty hard ceiling to crack. In such cases, you’ve to out-execute everyone else and that’s a hard ploy and makes less exciting for the investor. Example: Would you start another CRM company now and if so why would you do what the rest of the 1600 have not done. Even if you execute well, what market share can you capture?
  3. VC firms pitch to Limited Partners (wealthy individuals, family offices, pension funds etc.) more than startups do to investors. They’ve the same issue of having to convince an LP that a certain startup that’s pre-revenue will get an exit worth $100M in 7 years. To do that in India, when there was no such exit till recently, made it even less credible.
  4. Most funds last for 10 years. 3 years to invest and 7 years to grow and nurture those investments towards exit events.
  5. Among the top quartile or decile of startups in a portfolio, one company returns the entire fund. Top 5 companies return 90% of the capital.
  6. Each startup has to be a prospect for a $500M exit, for the fund to meet its “Return on Capital Employed” goals.

On what investors look for in a startup?

  1. In a SaaS startup, front loaded costs are high. So your first two rounds are not about revenue or profitability but more about Product-Market fit and elimination of business model risks.
  2. Integrity, smartness and hard working ethics of the team are important but not sufficient. There has to be a potential for $500M exit for that startup for investors’ math to work. Anything less is already a sub-par outcome.
  3. It’s the job of the entrepreneur to make the VC look and realize how big the market is. They see a 1000 pitches a month and carry stereotypes. Help them make the context switch.
  4. Integrity cannot be stressed enough — Questions about India’s professional ethics do come up.). Indian LPs too find it hard to fathom that it’s possible to legally generate a 25x outcome from a startup, given where they come from and what they’ve seen.

2015-10-07 11.12.37On how to negotiate investment terms

  1. Clauses are there to protect the downsides for an investor. If you understand why they are there it’s easy to have a conversation around them.
  2. Most dissonance that an entrepreneur feels is because s/he does not understand the responsibilities the investor has to his/her fund and their LPs.
  3. Clauses such as liquidation preferences are there to protect the downside of the investments. So long as you cover the down-sides as an entrepreneur, your negotiation leverage for not carrying over these clauses to subsequent rounds is high — Don’t get it yet? Ask entrepreneurs who’ve raised several rounds, on how to negotiate.
  4. Drag along clause is there so that an investor can get the fund its returns as the fund comes to the end of life. If that goal conflicts with your startup’s, look for funds that are early in their life, to take money from and thereby give yourself a better runway.
  5. Everything is negotiable if your numbers are good. All downside protections kick in only during the bad times. So the best way to stay on top of the negotiations is to execute well.

Contributed by Ashwin Ramasamy, ContractIQ

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The importance of having a defined mission for your start-up

If you are a small team, starting out to solve a problem, having a mission is hardly a concern. What must concern you at that stage is getting to the product market fit and customer validation.

But even after building a successful product and scaling the business to a sizeable extent, many startups hardly articulate a compelling mission for themselves. With early signs of success, founders directly jump onto growing the team, building feature-sets and scale the organisation. Not very far in the journey, many startups end up facing employee attrition, lack of passion in teams and alignment issues in their organisation.

Founders of growth stage startups often mention retaining talent and alignment as a big area of concern; and end up applying many tactics to resolve talent-related problems. However, the cause of these issues is much more fundamental and intrinsic to the organisation.

Before your push the scale button and look outside to attract other people to your startup, the impact of your mission can’t be overstated. It is very important for the founding team to sit together and extract and articulate the mission for their business. A meaningful mission that matters to the world would instantly change how you look at yourselves and the business. The same regular job would inspire a lot more passion and a sense of pride in doing it. A well-articulated mission makes it easier for prospective team members, customers and investors to relate to your business, decisions and get similarly inspired.

Every problem worth solving is hiding within it a deeper challenge and glorious mission, which needs to be extracted with patience. For instance, the mission for a food delivery startup could be “Savings humans worldwide from the discontent out of hunger”.

Beyond inspiration, a mission opens up the avenues of long-term thinking and frames the canvas of opportunities, ideas and themes of innovations for the business to pursue.

Guest Post by Lalit Mangal, Co-Founder & CPO, CommonFloor

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Are you in India/SaaS, and not at #SaaSx2? You missed transparent mind-blowing insights

SaaSx event is a meetup organized by a bunch of SaaS entrepreneurs for all SaaS entrepreneurs in India. SaaSx Chennai event enables SaaS start-up founders to learn and share tribal knowledge from SaaS (software-as-a-service) start-ups in various stages of the evolutionary ladder.  Every participant registered for the event and was vetted for fitness with theme of the event. (Do events really have qualifying criteria for participants beyond collecting money?)

A good number of us going from Bangalore to Chennai climbed SaaSy bus early in the morning. For everyone who climbed the bus, our learning started in SaSSy bus from Bangalore to Chennai. Entrepreneurs got comfortable with each other quickly and most seem to be in the mind-set described by Yamini “Running a company becomes a lonely job after a point. Super excited to meet other co-founders”.

After crossing to Tamil Nadu, we had breakfast and climbed back to bus. This followed with ice-breaker session where everyone self-introduced themselves and shared 2 things that worked for them and 2 things that did not work for them. Sharing brought the journey to end in Chennai. Some attended private roundtables, followed by lunch, SaaSX2 event started. FireSide Chat was kick-started with Aneesh Reddy of Capillary Technologies on ““The Nuances of Enterprise SaaS” by Ahi and Asha Satapathy.

  • Lonely initial start-up days when it was not cool to work on start-ups. That was okay and they got time to work focused.
  • Shared their approach to balance developing a product and customization needs of customers, how they make decision whether to do customization or not and when to actually execute customization.
  • Shared the challenge to collect money from customers after delivering service and the approach they took to streamline the same. For delays with large enterprise customers, one needs to evaluate whether it makes sense to follow with customer for smaller payments.
  • Shared being lucky not to take hard calls of firing people in India. He thinks firing makes it very difficult to hire senior people at some point of time.

Asha made Aneesh to share personal life tips by asking his advice to young entrepreneur’s to find life partner, which Aneesh coolly as “If you are entrepreneur or plan to be one, marry daughter of business man. She would be able to relate to you as she is already used to relate to her father”. The Next FireSide Chat was started by Sumanth Raghavendra with the man who has mapped SaaS growth from seed funding to Series B and beyond. Yes, Girish Mathrubootham. Earlier he welcomed us sharing his inspiration from thalaivar (leader) Rajinikanth, Tamil film actor. For me, Girish story is very similar to Rajinikanth movies, film world made real in software world.

Girish set context of his learnings and insights might contradict with Aneesh by sharing the difference between order ticket sizes in their individual business. Some of insights shared were

  • Focus should not be just about features in product, but any user must get value in 20 minutes without help from anyone.
  • B2B SaaS is never a winner takes it all market. There will always be a set of 2 to 3 credible players.
  • Decision to spend $40K money earned through Microsoft Hackathon to explore different marketing channels and evaluate their effectiveness. Required courage to spend on marketing against conventional wisdom of boot-strapped start-up booking the money for other purposes.
  • When customer land on the website, product experience starts right at that moment. The customer needs to like what he sees and when he signs, he needs to get value out of the website. If customer ends up saying atleast a vow, there is more probability that the customer might spend time in the next 30 days evaluating your products.

In between sessions, I loved the concepts of #onething at conference where entrepreneurs are asked to share one thing as response to a quick round of questions. Here are few fresh in my mind.

      • #onething “Simplify and communicate “helped team to scale was awesome #communication among team members. The context was the presence of start-up team across multiple geographies.
      • #onething “Should we change focus from Minimal-Viable-Product (MVP) to Billable-Viable-Product(BVP) ?” No money flowing is opinion but cash on table is fact. The Value of BVP: After 30 days of trial, will we get revenue on day 31?
      • Today internet earnings are migrating from advertising to commerce. With more commerce happening, product information is core to the future of brands and market.
      • Choice of Cloud in 2008 enabled us to establish India ecosystem for health management /diagnostics technology products and created a whole new SMB market of SaaS offerings.

Dorai moderated Unconference session. The session started with narrowing down to 3 topics based on audience preference of topics. It just happened that first topic “Inside Sales for SaaS products” took most of the time. It was nice to see exchange of folks with challenges asking questions and folks who cracked challenges sharing their insights. It was nice to see Suresh and Girish stepping up to share their inputs for most of the questions. May be this is exactly how real knowledge sharing should happen.

iSPIRT continues its focus to encourage learning and sharing among entrepreneurs as support for their journeys and here is second event in 2015 to demonstrate their commitment. Here are my thoughts after the event

  • Each questions of entrepreneur’s comes from real world challenges. The answers are not in text book and the answers have to come from real world experiences and are not available in textbooks or class rooms.
  • Learning from SaaS start-ups is tight connected with the context where SaaS start-up operates. Without context of the start-up, insights are of little or no help to entrepreneurs, as learning of SaaS start-up in first context contradicts with the learning of SaaS start-up in second context.
  • No one tried to create good impression. All were open to share their mistakes and what they learnt in the rough way. Indirectly saying that “Failure is first step towards success”.

Here are #bigMistake heard from Bangalore entrepreneurs in #SaaSyBus

  • Sold to friends & thought we were good, product ended up weak. Should’ve sold to toughest customers 1st to make prod strong
  • Hired for start-up experience and skills. Should have hired for attitude and culture fit.
  • Build the product along with sales. First few paying large customer got pissed off and jumped away.
  • Following templates for success does not work. Need to find your own path and your own means to succeed.
  • Took a lot of money from investors and became complacent. Will bootstrap next time.
  • Build a product for a market that was 2small. Now moved to a bigger market and trying hard.
  • Corporate experiences and start-up life are poled apart. Do not worry about other, competitors.
  • Being too passionate when things get hot. Need to step back and take a hard dispassionate look and face reality.
  • Trying to hardsell. Now we just do demos, show the value, if they see the value they will buy.
  • Selling operational cost efficiencies in a fast market does not work.
  • Customer say wants, not need. Product roadmap cannot be based on customer inputs, must come from deep within.
  • Delaying product launch to polish it. Need to launch fast and get market feedback and face reality.

Guest Post by G. Srinivasan

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SaaSx2 rocked :-)

I have read about startup founders who don’t (or stopped) attend events – justifiably so. In ecosystems where there is now an entire industry of events springing up (i.e. it feels to me that some people’s startup in itself is all about organizing events), it becomes very difficult to separate the wheat from the shaft. Overall, value gets diluted in a bid to make profit. SaaSx2 is in its own class by all standards, hey, not because profit wasn’t the motive, but purely because of the value delivered. I couldn’t have asked for more.

Saasy

The journey to SaaSx2 started at the Microsoft Ventures office in Bangalore at around 5:16am. All roads lead to Chennai. For the first time, I decided to take a bus ride longer than 3 hours in India. I couldn’t look away from the opportunity to take a bus ride with fellow entrepreneurs. I thought it’ll be fun; and yeah, it was. To ensure we didn’t sleep, Prasanna of Microsoft Ventures made all of us do a quick introduction. All entrepreneurs got a chance to introduce themselves, their startup, why they launched, lessons learned so far and what they intend to learn at SaaSx2.IMG_20151007_160446

SaaSx2 exposed SaaS entrepreneurs to insights and strategies to capture several segments of the market. From targeting “Elephants” (i.e. big clients) to chasing “Rabbits” (small clients), SaaSx2 had all startups covered. You just have to pick the context that applies to you. From Aneesh’s (cofounder and CEO of Capillary Technologies) fire side chat to Girish’s (Founder and CEO of Freshdesk) session and then to Hiten Shah’s closing session, growth tips were just flying around everywhere in the hall. Badass all through. The panellists were real, the “one thing” sessions were direct and insightful. Emm, my secret admiration for the founder of FreshDesk, “Girish Mathrubootham” just rose to another level.

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In a buzz word dominating industry, it’s easy to get swamp in grammar instead of reality. So, instead of just using those fancy words like “disrupt”, “pivot”, “grow”, each of the panellists actually went deeply into how to do all of those. From sharing real numbers to walking us through the journey, they couldn’t have delivered more value than that.

At the unconference, entrepreneurs shared some of the issues they have and asked the audience for help. Talk about entrepreneurs seeking help from fellow entrepreneurs.

No sycophancy. No bullshitting. No flattery. SaaSx2 had a floorless execution and is an example of how startup events should be. iSpirt has raised the bar. Beat yourself if you didn’t attend. Rice, Soup Very Plenty (RSVP) – Did I mention that food and beer was all in surplus? Ah, emm, thanks to FreshDesk for the dinner.

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And thanks to the point man himself, the man who I think prefers to be at the background, Avinash Raghava :-).

Looking forward to SaaSx3.

Guest Post by Oluwatobi Soyombo, 1Plify. 

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The Freemium Business Model – What it is and how to make it work.

Summer’s here!

The sun, the vacations, the beach and last but not least, the lemonade stands.

Those little kiosks on the roadside and kids standing beside each of them with jars of cold lemonade, glasses, and inviting smiles.

So Joshua was among those 8-year-olds who had setup his own lemonade stand, for the first time.

The stand was set, the lemonades were ready, he was good to go.

Just then he realised something: there were about 5 lemonade stands in his neighborhood and all of them were the same. He wanted his stand to stand out.

And so he came up with a plan.

In his stand, people would get a plain lemonade for free. In addition to that he will offer around 5 other flavoured lemonades (watermelon or strawberry flavours, anyone?), which would come at a price of $1 a glass (to make up for the cost of giving free lemonades).

The result?

Joshua’s stand not only attracted more crowd, but also got him earning more than his friends.

Well, what we saw here was a small-scale version of what we call the “Freemium model”.

For those of you who need a concrete definition for this term, here goes:

“Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc, then offer premium priced value added services or an enhanced version of your service to your customer base.” – Fred Wilson, VC

Basically the objective of this model is to get the users hooked to the free product, thereby motivating them to subscribe for the paid plan and also promote the product via word-of-mouth.

Chris Anderson in his book “Free” explains that Freemium works on the 5 Percent Rule – where 5% of premium customers support the remaining 95% of free users and also the cost of servicing the 95% is close to zero.

Companies like Evernote, Dropbox, Pandora, Linkedin, Skype, etc., are among the many Freemium success stories.

In fact, Mailchimp has reported a whopping 150% increase in paying customers and 650% increase in profit, within a year of going freemium.

The main plus-point of the Freemium model is that you can do away with the traditional sales-driven marketing strategy – the potential customers get to learn by themselves about the benefits of the product by trying it out, before even buying it (winning their mind share).

In addition to this, with the help of the data from your free users’ behaviours, you can easily find out what features of your product are/aren’t their favorites and which segments of the market are getting the most out of your product (cohort analyses will help).

A good example would be Box, which uses their Freemium model to identify potential upgrade customers, who are then contacted by the salespeople.

But just like any other business model, Freemium has also seen its fair share of failures and criticisms.

In 2006, Google Apps launched a feature for businesses, where they could customize their domains (@yourcompany.com). In 2012, the company announced that they’re taking away the free version and that businesses of all sizes must pay $50 per user per year (or signup for a flexible plan of $5 per user per month).

In one of our previous posts, we had discussed in detail about the various risks associated with a Freemium model for a SaaS business and what you can do to monetize the free users who don’t have an intention to upgrade.

CrazyEgg claims that their monthly revenue doubled once they dropped their free plan.

BUT, this was what Hiten Shah, its co-founder, had to say about the move:

“It was a short-term great decision for increasing revenue but I believe it was not the best decision for the long-term….If I’m starting a new SaaS business today, I would highly consider having a free plan that you invest resources in and plan on keeping forever.”

So what can you do to make your Freemium model a success, like how Joshua nailed it?

Firstly,  not all business models would suit all businesses alike and choosing the model that works right for you is crucial. The Freemium model is no exception to this rule.

A Freemium model would suit you, IF

  • You are positive that your lemonade is the best in the neighbourhood:

You have a high-quality free product which people would want to get their hands on (solves an immediate need/pain).

Also, you know that your long term Freemium users will eventually convert to paid users – which will only happen if the users derive sufficient value from your free product.

  • You’re certain that making 10 lemonades and 100 lemonades would cost you almost the same:

The cost of duplicating and distributing your free product is close to negligible.

The basic economics behind this model is that with the advent of SaaS (multi-tenancy), the marginal cost of distributing a software product among a 100 or a 100,000 is nominal.

  • Your customers know what a lemonade is, how to consume it and how it quenches their thirst:

The features of your free product are simple enough for the customers to educate themselves about and they don’t need hands-on training or support from your side (remember, keeping the cost as minimal as possible is the key).

Any business that involves high customer acquisition or customer service costs is not suitable for a Freemium model.

  • Your stand is in a busy street corner where there are a lot of passers-by – you’ve got enough people thirsty for your lemonade:

Your product will have a large reach and your potential market is huge.

As only a small percentage (1-4% on an average) of your free users would convert into paying customers, you need make that a small percentage of a large number to run a profitable business.

This also means that you have the sufficient infrastructure and operations to serve a mass market.

“The easiest way to get 1 million people paying is to get 1 billion people using.” – Phil Libin, CEO of Evernote

  • You know that people will keep coming back for more lemonade!

Your product promotes repeat usage (increases the stickiness). For example, Evernote’s smile graph. Or, it makes use of the network effect, i.e., the product becomes more beneficial as more people use it (e.g. GitHub).

Evernote’s Smile Graph

Image Source: http://www.inc.com/magazine/201112/evernote-2011-company-of-the-year.html

You must also look at ways of increasing your switching cost. One way could be enhancing the usability of the product, so that the users make use of more features, add more data, and get more value over time.

Because the user commitment drastically reduces when the customers use a product for free, you need to look at other ways to increase commitment.

  • People would love free lemonades, but not free babysitting!

Your product falls into a category where the customers would be happy to get it for free.

For instance, you’ll be happy to use a free app for storing your photos, but not a free lasik surgery. Mission critical products that require extensive support upfront may not be suitable for this business model.

Chargebee itself would be a good example for this case. We experimented with a freemium model for 6 months and learnt some interesting lessons about the type of customers we were attracting and the ROI in terms of free to paid conversions. We eventually decided to grandfather-in the pricing for our existing customers and to discontinue the plan for our new customers.

That pretty much sums up the set of criteria that need to be satisfied to choose the Freemium model.

And if you replied “Yes!” for each of the above points, then read further.

Rob Walling, CEO of HitTail compares the Freemium model to a Samurai sword – “Unless you’re a master at using it, you can cut your arm off.”

Now that you’ve decided to pick up the Samurai sword, let’s look at the “right” ways of using this sword – a few aspects that you need to pay attention to, to make sure that you don’t cut yourselves.

  • No one’s gonna be interested in drinking water from a lemonade stand – even if it’s for free!

You need to find out the optimal balance in the features that you’re offering for free.

If the free features aren’t captivating enough, you simply won’t attract users. If the free features are in abundance, then there’s a good possibility for you to get the required traffic, but you will fall short in the conversion rate.

Also, if your users are getting converted to paid customers all together, it might even imply that your free product is not good enough – which again would be a concern.

You need to know where to draw the line.

  • Joshua chose ‘flavors’ as the segmentation parameter – what about you?

For starters, you could choose a single parameter to differentiate your free plan from the paid plan.

It must be the best possible representative of your product’s value and it must increase with usage, like file storage space and number of stored messages for HipChat.You must then decide on how much of the parameter is going to be for free – set the limits.

Once this is done, you can even think about further enriching your paid plan with a few other premium features – but remember to keep it uncomplicated and straightforward.

  • Who doesn’t want to try out interesting flavours in lemonades?

You need to have a clear upgrade path for the users. For example, Dropbox starts charging the users once they exhaust the free storage space – here the reasons to upgrade into a paid customer is clear to the user.

You must also clearly distinguish the free and the paid plans to help the users see the value in paying you more (to answer the “what’s in it for me?”), thus making it more compelling to upgrade.

  • Are your customers talking about your lemonade stand – is the news spreading?

You need to pay attention to the virality quotient of your product.

Are your free users liking your product? Yes.

Now how to make them spread the word?

You need to device proper referral programs and incentives to achieve that. Yesware, an email tracking tool, attributes its revenue margin to its referral program.

The baseline is this – Your free users SHOULD fall into one of these two categories:

1. Those who will convert into paid customers in due course (Asana allows about 29 people to use its services for free, beyond which it starts charging them)

(or)

2. Those who will help in acquiring more free/paid customers (Dropbox’s referral program)

If not, then it is time to rethink your strategy.

Conclusion:

Joshua’s goal was simple – to make his lemonade stand attractive and earn more than the other stands in his neighbourhood. And he made sure that his goal was met. If it hadn’t been met, he would’ve tried out yet another plan.

You must have a specific set of clear objectives of why you’re choosing the Freemium model – conversion rates, revenue, virality and ultimately your ROI and profitability.

If you’re not getting the expected results, then you might be doing something wrong.

For instance, Chris Anderson says that you must strive for a 10% conversion rate from free to paid.

If the rate falls below that, the cost of serving the freeloaders will make it difficult for you to make money. On the other hand, a rate more than that would signal that you’re offering too little in your free version, which might limit your reach.

Set yourself measurable goals in the long run and ultimately if your goals and your customers’ goals don’t coincide/align, you mustn’t hesitate to pivot. Like how Google did.

May be you need a different model to make your lemonade stand succeed.

Reblogged from ChargeBee, blogpost by Sadhana Balaji.